These exchange-traded funds offer effective exposure to technology stocks.
Thanks to inflationary pressures and the unique dynamics of the marketplace in 2021, the leading stocks on Wall Street this year have been largely energy-related stocks. However, when most investors think about growth opportunities, they typically think about Big Tech as exemplary of a dynamic group of stocks with a ton of upside potential. There’s no way to know for sure which industries will outperform in the new year, but if you’re bullish on tech, these seven top ETFs could be worth some investigation.
Invesco QQQ ETF (ticker: QQQ)
This massive $206 billion fund offered by Invesco is not exclusively a tech fund, as it’s benchmarked to the Nasdaq-100 — that is, the top 100 firms listed on the Nasdaq exchange. But since that methodology excludes a lot of traditional U.S. stocks listed on the New York Stock Exchange, such as Bank of America Corp. (BAC) or Exxon Mobil Corp. (XOM), the result is a different sort of index. Consider that the popular S&P 500 allocates about 23% of assets to tech, while QQQ instead has about half of its assets there and nearly 20% in “communication services” stocks that include Facebook operator Meta Platforms Inc. (FB) or internet giant Alphabet Inc. (GOOG, GOOGL). In short, this is theoretically a broad fund but is in fact a way to get biased toward tech in a liquid and diversified fashion.
Technology Select Sector SPDR Fund (XLK)
A truly sector-specific fund, XLK is one of the most popular tech ETFs to buy among American investors. Tied to the stocks in the sector that are also components in the S&P 500, there are nearly 80 total positions in this fund that represent the big dogs of Silicon Valley. In fact, the only knock some tech-focused investors may have is its reliance on traditional leaders. Launched in 1998, the ETF has grown to a dominant size with $50 billion in assets but about 45% in two picks alone — Apple Inc. (AAPL) and Microsoft Corp. (MSFT). You get other big names too, but this is very much a way to play the old guard of the tech sector.
Vanguard Information Technology ETF (VGT)
Though still heavily weighted toward larger tech stocks, with just over half of its assets in the top 10 positions, VGT widens its portfolio to a total of 300 or so U.S. companies in the sector for a more diversified look at tech. And as is typical of Vanguard, you get this exposure at rock-bottom prices. This $45 billion fund charges just 0.1% annually, or $10 on every $10,000 invested. That’s an affordable structure to play all manner of software stocks, IT firms and electronics manufacturers.
First Trust Dow Jones Internet Index ETF (FDN)
Though a bit more specific, FDN is still a behemoth of a tech fund with nearly $10 billion in total assets. However, it differs in that this tech fund follows the Dow Jones Internet Composite Index that is comprised of the largest and most actively traded stocks of U.S. companies with a clear internet angle. In other words, you won’t find microchip manufacturers but instead will see names like Amazon.com Inc. (AMZN), Netflix Inc. (NFLX) and Salesforce.com Inc. (CRM) at the top of the list. If you’re bullish on tech largely because of digital opportunities, FDN is a good way to ensure you’re invested in these kinds of companies.
Amplify Online Retail ETF (IBUY)
While Amplify isn’t exactly a big asset manager like the other firms here, its tactical e-commerce ETF is quite popular with more than $1 billion in assets. It’s also well diversified despite this targeted approach, with about 60 total positions and no single stock representing more than 2% of the fund, thanks to regular rebalancing. That means that, unlike some of the prior funds, you won’t find that list dominated by old-school names. While the ever-popular Amazon does make an appearance, it’s only 2.2% — right beside travel portal Expedia Group Inc. (EXPE) and computer parts merchant Newegg Commerce Inc. (NEGG) that have about the same weighting.
iShares Global Tech ETF (IXN)
Launched in 2001, and with nearly $6 billion or so in total assets, IXN is a great tech ETF for those who don’t want to be limited to just U.S. stocks. Specifically, this iShares fund tracks the S&P Global 1200 Information Technology Sector Index to offer wide exposure to hardware and software companies worldwide. America is admittedly at the top of the heap, with more than three-quarters of total assets allocated to U.S. stocks. However, the added exposure to global giants like chipmaker Taiwan Semiconductor Manufacturing Co. Ltd. (TSM) or Korea’s Samsung Electronics Co. Ltd. (SSNLF) ensures you play the whole array of major tech stocks and not just the domestic leaders.
KraneShares CSI China Internet ETF (KWEB)
Interestingly enough, there’s a fund out there larger than some of the others that’s even more specific. With $8 billion in assets, KWEB has a tactical approach that invests only in China-based technology companies and only those involved in internet-focused businesses, as opposed to manufacturing. To top it off, these stocks must be listed in both the U.S. and a local exchange like Hong Kong. This methodology gives you a great lineup of dynamic names including Alibaba Group Holding Ltd. (BABA), Tencent (TCEHY) and Baidu Inc. (BIDU). It’s admittedly riskier to lean on a specific subsector within a specific geography, but if you think there’s potential here, then KWEB is worth a look.
7 Best Tech ETFs to Buy for 2022:
Invesco QQQ ETF (QQQ)
Technology Select Sector SPDR Fund (XLK)
Vanguard Information Technology ETF (VGT)
First Trust Dow Jones Internet Index ETF (FDN)
Amplify Online Retail ETF (IBUY)
iShares Global Tech ETF (IXN)
KraneShares CSI China Internet ETF (KWEB)
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7 Best Tech ETFs to Buy for 2022 originally appeared on usnews.com
